BI Space Coast Chapter logo

BetterInvesting Space Coast Chapter

Potpourri

BI Schoolhouse

Page Links -> Home Page * Events * Chapter Contacts * Potpourri * TT&T for Toolkit & Stock Study *
TT&T for Stock Prospector * Club Accounting * Chapter Directors * Doorway to Clubs that Welcome Visitors * Movie Links *
Investment Clubs * Training Syllabus *
Index

Page Items -> Opinions * External Links * Thank you! * Top of Page

Various Opinions or Comments of Note on Various Subjects

The Opinions or Comments offered here are those of the author and are not necessarily those of all of the BetterInvesting Space Coast Chapter directors or of the national organization. They are shown here only for your consideration.

On Bonds
From BetterInvesting's Investing Discussion List digest [discussions@lists.betterinvesting.net] dated 3 October 2009

I have a little different take on this stocks vs. bonds issue than many do.

And my convictions have crystallized over the past few years. Looking at return vs. yield is a short-term perspective, I think. Hardly where we need to be looking.

I believe as Peter Lynch has advocated, that we should always invest as if we're going to live forever! Therefore, I'm always going to want to enjoy being the part-owner of a number of successful businesses and enjoy watching the growth of my investments continue, regardless of what the stock market does. The real value of the companies whose shares I own is constant and continually rising as they increase their profits and add more to their equity. This is true, whether or not the herd recognizes it at any given moment by awarding those shares a price consistent with their real value. I have only to wait a while for that to happen, should the market be down.

Buying bonds means paying a substantial premium to enjoy a steady income, instead of my having to wait for the herd to come to its senses to enjoy the benefits of business ownership. My view (as a guy who just entered his eightieth year) is that the substantial disparity between bond yield and what I can gain through appreciation during the good times way more than offsets what I might lose during times like these, when I might have to accept something less for some of my shares than what they're really worth and would sell for later.

And, when I watch the herd try to outguess the market's random movement, vacillating between stocks and bonds, it makes no more sense to me than does technical analysis!

But I certainly agree with you about equity ownership being a better hedge against inflation than bond income. And it does appear we're in for substantial inflation at some point. We're well into our grandkids' generation now, mortgaging the future for our current indulgence. And, with its pusillanimous mindset, our political leadership (an oxymoron, of course) will always come down on the side of printing money rather than rewarding belt-tightening, industry, and entrepreneurship-the only things that can turn things around and solve our economic problems.

Ellis Traub
Take Stock

On Folio Investing
RE: Folio Investing Offers BetterInvesting Clubs Commission-Free Trading
From: "Ellis Traub"
Date: Tue, 29 Sep 2009 18:20:18 -0400

Folks,

I'd like to chime in with my two cents here.

I have used FolioFN.now Folio Investing.for all of my investments and for a good long time. In fact, I well remember when Nancy Smith, NAIC's liaison with the SEC and its education arm, left the SEC to participate with Steve Wallman in building FolioFN.

I've strongly recommended It to others in http://www.financialiteracy.us/wordpress/2009/04/28/buying-a-stock/ my blogs, broadcasts http://www.blogtalkradio.com/Ellis-Traub/2009/08/20/Take-Stock-with-Ellis-Traub , and book http://www.iclub.com/products/tsbook.asp and can't praise their services highly enough. It's an excellent place to put your money and is perfect for our kind of investing. Moreover, their twice-a-day window sets them well ahead of the field.

In his book, "The Folio Phenomenon," Gene Walden spells out all of the benefits of "window trading," which provides the foundation for the low cost of folio investing, and how you can enjoy all the good things about a mutual fund with none of the negatives.

Walden says that the only downside to using a folio brokerage is that you have to pick your own stocks! Hah! This is like Br'er Rabbit's begging his nemesis not to throw him in the briar patch. It's right up our alleys.

There is no better way for a club to work. I can remember my club going through the process of deciding how many shares of each stock we were going to purchase and having to divide the dollar amounts up by whatever the current market value of the shares was. We would always come up with odd numbers and cash left over. Now a club will be able to simply divide up the dollars as it wishes into whatever investments it would like to make, even adding to existing positions. And the fractional shares are all accounted for.

I want to commend NAIC/BI and Folio Investing for joining forces as they have, to give clubs this special opportunity to enhance their investment experience. And, even without any additional incentive, I would recommend it to individual investors as well.

Oh, and a disclaimer: other than enjoying the benefits of being a delighted client, I have no financial interest in FolioFN whatsoever.

Ellis Traub
Take Stock

PERT-A Graph
PERT-A Graph
From: "Ellis Traub" etraub@financialiteracy.us
Fri, 9 Oct 2009

Perhaps the most misunderstood graphic in the entire Toolkit suite, the PERT A graph has caused many to make poor decisions because they didn't fully understand what they were looking at.

We're used to seeing data-raw data-graphed in the tools we're accustomed to using. And, in that case, the interpretation of the lines that connect the dots is pretty straight-forward, Sales growth, earnings growth, etc. We know we're looking for straight lines with a comfortable up-slope.

What causes the problem with the PERT A graph is that we're actually using the rates themselves for data instead of the raw data. That is to say that each point on the graph represents a rate of growth, be it quarterly or over a twelve-month period. And, the interpretation of that graph is not as straight-forward. For example, if the data is horizontal, going straight across the page, at the 15% level, that means that the actual data is growing steadily at 15%! It doesn't mean that the data is flat.

Even when the points are trending down, it means that a very healthy growth rate may be declining and still be very healthy. A down-slope in the data on the PERT A graph simply means that the rate of growth is slowing. It doesn't mean that the sales or earnings, themselves, are declining.

The caveat that you mention merely points out that, if your expectations were for the company to grow at 15%, let's say, then your sales/earnings growth line.representing your projected growth rate from the front of your SSG, which you selected to be 15%.is the that horizontal line across the page that represents steady, 15% growth. And you're hoping the line that connects the data (the growth rates for each period) will not breach that sales/earnings line, because it would indicate that growth had slowed to below 15%.

That said, most who misinterpret the PERT A graph become alarmed at a steep decline in the line connecting the rates and believe it's portraying a serious trend down, when all that's happening, frequently, is that the company's growth rates are coming down to a reasonable level from a level that was unsustainable.

My preference is to keep the Trailing Twelve Month option selected rather than the Quarterly growth. I don't want to get spooked just because a single quarter was poor. If that single quarter was bad enough to push the rate for the entire year below my expectations, I'll take the time and trouble to research it to find out just what happened. And, I'll then look at the quarterly representations to see how those looked.

I hope this helps. This is something that needs to be trotted out and explained regularly because it's a very common misconception. And, because we're used to analyzing the growth of the actual data, it's not infrequent for us to misinterpret it anyway, just because we're not paying enough attention to what it actually means.

Ellis Traub
Take Stock

Page Links -> Home Page * Events * Chapter Contacts * Potpourri * TT&T for Toolkit & Stock Study * TT&T for Stock Prospector * Club Accounting * Chapter Directors * Doorway to Clubs that Welcome Visitors * Movie Links * Investment Clubs * Training Syllabus * Index

Page Items -> Opinions * External Links * Thank you! * Top of Page

Links to Interesting and Educational Sites

Page Links -> Home Page * Events * Chapter Contacts * Potpourri * TT&T for Toolkit & Stock Study * TT&T for Stock Prospector * Club Accounting * Chapter Directors * Doorway to Clubs that Welcome Visitors * Movie Links * Investment Clubs * Training Syllabus * Index

Page Items -> Opinions * External Links * Thank you! * Top of Page

Thank You!

The Space Coast Chapter Directors wish to express our thanks to the below commercial entities who support our non-profit educational efforts.

At the top of the list must come Empire Hosting and Castlegate. One or the other has been the Web Presence Provider for our chapter since our entry onto the internet. We are most appreciative of their donation of their service.

Page Links -> Home Page * Events * Chapter Contacts * Potpourri * TT&T for Toolkit & Stock Study * TT&T for Stock Prospector * Club Accounting * Chapter Directors * Doorway to Clubs that Welcome Visitors * Movie Links * Investment Clubs * Training Syllabus * Index